The 300k is not a gift, it’s not free, it’s a temporary stay of execution. Let’s say they have a 3 year or a 5 year mod. If values increase in that time (or after that time), if they want to sell in that time, if they want to refi in that time if they want a heloc in that time, if they want to do anything other than just pay the rent(you can call it a mortgage I guess) then the 300k kicks back in. It doesn’t accure interest, I guess it’s not as bad as a neg am, but it’s damn close. I also agree that over 300k was too high a few months ago, but it’s bounced off bottom a bit, probably closer than you think. If it were to get repo’d it would cost gmac a year of no payments, lost interest, leagal fees, processing fees, back taxes and back hoa. In the end, they’d probably get close to mid to high 2’s and probably net only 200k after all is said and done. So they rig the payement to get them to stay, only lose a little a month on the lost interest for the 300k, and down the road they will recover more than the 200k, maybe get all their money back, a little chip in from the govmt, like 15k towards the interest (not sure what hope4homeowners pays the lender these days).

The riddle is, they are not on a path to ownership, at then end of this loan they don’t own the home. What do you call money tht you pay that does not go towards eventual ownership, equity and you will not partake in the appreciation? Hint: it rhymes with DENT!

However if their new payment is on par with current rents and they do get to deduct their payment, it makes sense to stay as opposed to walk away as long as they can do it and they have no chance at buying one accross the street anytime soon, which would allow them to rest their basis.

So don’t get mad at other peoples mods, if saw the actual terms, if it were an actual loan you could get when buying, you wouldn’t want it, just like you didn’t want a neg am, I/O, option arm special.